Elliot Rabinovich, Arizona State University
Arnold Maltz, Arizona State University
Rajiv Sinha, Arizona State University

We investigate the links among markups, service quality, and product attributes across customer, Internet-retailer, and wholesaler echelons. Little is known about how retail markups, in particular, are related to service quality and product attributes. To examine this issue, we developed a model of Internet retail profitability that separates revenues and costs related to sales transactions from other profit sources. This framework led us to synthesize studies that have focused on service quality dimensions in the Internet retailing space. Subsequently, we developed a critical-event study based on a profit model and the synthesis of service-quality dimensions in order to delineate service aspects that retailers need to address buyers’ utility. Finally, we collected data from purchases across retailers in order to isolate markup-service quality relationships along our delineated service characteristics. We find that high markups are associated with superior performance by Internet retailers across several service quality dimensions (a service premium effect).


Published in Production and Operations Management, 2008, Volume 17, No. 3, pp. 320-337.